The dollar has resumed its record-breaking run. Since late November, the American currency has been gaining in value and hitting new highs. The main reason for its growth was US President Joe Biden’s decision to renominate Jerome Powell for a second term as chair of the Federal Reserve.
The foreign exchange market, along with others, reacted positively to the news that Powell would retain his post. The US dollar index, measuring the value of the dollar against a basket of six world currencies, jumped by 0.52% in one day to settle at 96.55, the highest level since July last year. As a result, the euro dipped by 0.46% to 1.1236 dollars per euro, hitting a 16-month low. Moreover, it continues to trade in this range. Analysts believe that the US currency has every chance of gaining value in the long term. The Fed’s sound policy, coupled with a more rapid US economic recovery, enables the greenback to gain strong upside momentum. Furthermore, Biden’s decision to allow Jerome Powell to keep leading the Fed would only help the dollar edge higher.
Jerome Powell is an investment banker and a dollar millionaire. He has been serving as chair of the Fed since February 2018. His current term is due to run out in February 2022. The other top candidate for this job was Federal Reserve board member Lael Brainard who had already been interviewed for the Federal Reserve chair role at the White House. However, Joe Biden decided to renominate Powell for a second four-year term. This means that the regulator will most likely continue to gradually tighten monetary policy. Against this background, 92% of traders in the futures markets are betting on the Fed’s first interest rate hike in June 2022, although at the end of last week, only 70% of market participants expressed the same opinion.
